The rise in online shopping has seen an increase in the use of credit cards for payment. However, despite this competition from credit cards and other
The rise in online shopping has seen an increase in the use of credit cards for payment. However, despite this competition from credit cards and other sources, such as bitcoins and mobile pay, cold hard cash is still used by consumers more than any other type of payment.
According to a 2016 Gallup poll, 62% of Americans feel society will become cashless in their lifetime, driven largely by millennials. However, the population is aging, and that same poll showed that older adults generally like to have cash on hand, and that those in their peak earning years typically carried the most cash – most likely because they make the most and have more to spend it on.
Drives to eliminate corruption, illegal immigration, and tax evasion have led to suggestions that paper money be removed from circulation. India removed 23 billion notes from circulation to fight it, and a noted Harvard economist is proposing the U.S. do the same by eliminating any bill over $20. Norway’s largest bank has recently advocated a total end to cash. The war on cash seems to be never-ending.
However, the demise of cash is greatly exaggerated. With value amounts of 1.5 trillion in U.S. dollars and over 1 trillion in euros in circulation around the world, it appears that cash isn’t disappearing any time soon.
Cash is Still Dominant
A study by the Federal Reserve on cash use in seven countries yielded some salient facts. Between 46% to 82% of all transactions in the seven countries were done by cash. Austria and Germany led in cash usage, with cash payments in Canada, France, and the U.S. used the least. In all seven countries, the value of transactions done with cash were less than the value of credit card transactions. The typical consumer carried the equivalent of $30 – though the Germans and Austrians typically carried more.
This study suggests that cash is still a major player, but primarily for small purchases. This could be due to many smaller merchants not taking credit cards because of the expense involved. The Federal Reserve study indicated that low-income consumers were far more likely than higher-income consumers to use cash. For many reasons, there are millions of consumers who can’t get credit cards. Many don’t trust banks and only use cash – 10 million households in the U.S. alone are unbanked. For some, using cash is the way they stay on budget. It is real-time, there are no hidden fees, and it doesn’t rely on technology – you can use cash when batteries are dead in your devices.
While cash usage has declined with consumers in their 20s and early 30s, the use of cash in the young and the old has remained constant. This could be because for the very young, no credit history means a reliance on cash, and for older consumers, old habits are hard to break.
Cash Isn’t Going Away
The bottom line is that cash is still used more than any other payment method. The convenience, ease of use, real-time accounting, and anonymity are some of the reasons a cashless society is still far in the future.